21 Feb, 2008
Published: 08:21 Thursday 21 February
By: David Campbell, Investment Reporter
global economy is coming to the end of a 50-year credit super cycle
Aberdeen's Citywire AAA-rated head of global equities Stephen
Docherty has warned.
Docherty said that the world will face some 'extremely tough
questions' on how to manage growth and inflationary pressure in the
'Over the past fifty odd years, since the second world war
essentially, whenever we have had intense pricing pressure we have
been able to turn to the developing world to control costs by
exporting business and manufacturing,' said Docherty.
'While this has controlled pricing and labour costs, it has also
had the effect of exporting our inflation. We are running out of
places where we can now turn to.'
Docherty pointed to the fact that, by some measures, Chinese
inflation is currently running at around 10%, its highest for more
than a decade.
'I would guess the biggest question is whether the Fed will
continue to cut rates,' said Docherty. 'Everyone is now looking to
them to be the saviour in this situation, but equally it has been
what has brought us to where we are now and the American consumer
is being encouraged to continue with an unsustainable level of
'Somewhere down the line the US is going to have to accept that it
is going to feel some pain, whether that is in the form of
inflation or lower growth.'
He said that he had faith that the macro economic view was not
always reflected in corporate balance sheets however, and that
there remained well funded and managed companies capable of
offering consistent returns.
Docherty's Aberdeen World Equity fund returned 3.7% to investors
over the 12 months to the end of January 2008 versus an average
manager return of -0.7%.